US embassy cable - 05MILAN500

S E C R E T SECTION 01 OF 02 MILAN 000500 
 
SIPDIS 
 
STATE FOR EUR/WE, EUR/ERA: BROWN, EUR/PGI: REASOR, 
EB/ESC/TFS: CLARK, S/CT: KUSHNER, NL/C/CP: PETERSON 
TREASURY FOR OFAC 
 
E.O. 12958: DECL: 11/02/2015 
TAGS: EFIN, ETTC, KTFN, PREL, KISL, PTER, IT, ANTITERRORISM/FORCE PROTECTION 
SUBJECT: FIELD-LEVEL IMPLEMENTATION OF ITALY'S 
ANTI-TERRORISM FINANCE CONTROLS 
 
REF: A. A) ROME 3479 (NOTAL) 
     B. B) 04 MILAN 477 
 
Classified By: Classified by Consul General Deborah Graze for reasons 1 
 
.5 (b) and (d). 
 
1. (C) Summary: Further to reftels, in recent follow-up 
meetings, our contacts reiterated that Muslim extremists in 
Italy are not using the official banking and formal money 
transfer systems.  The formal financial sector appears to be 
actively implementing Italian legal controls.  Law 
enforcement and magistrates are grappling with how best to 
investigate informal means of transferring funds, often 
smaller amounts carried by a trusted member of the group 
(pocket transfers).  These investigations are often further 
complicated by the lack of cooperation by authorities in the 
destination country.  One banker complained of the lack of 
central coordination of the various lists of names (e.g. UNSC 
1267 Committee, EU, OFAC). Further, while reconfirming the 
bank's eagerness to cooperate fully with authorities, he 
expressed frustration that banks are increasingly being asked 
to do law enforcement work.  End Summary. 
 
Informal Market Remains a Concern 
--------------------------------- 
 
2. (SBU) Reftel B reported meetings Congen Milan held summer 
2004 with banking contacts and money transfer operators to 
discuss implementing anti-terrorism finance controls. 
Econoff recently conducted similar meetings on developments 
this past year.  Everyone with whom we spoke (bankers, money 
transfer operators, law enforcement and judicial authorities) 
was confident that the current controls have disrupted 
financial flows through the formal sector to support 
extremist activities.  However, many thought that extremists 
now use alternative transfer methods, which are more 
difficult to detect and control. 
 
3. (C) As Luigi Orsi, an investigative magistrate in Milan 
specializing in terrorism finance cases explained, "the more 
primitive the approach, the more difficult it becomes to 
detect," adding that his investigations show "almost nothing" 
transferred through official banking channels.  Contacts at 
Western Union told of "known" immigrant bus drivers who carry 
cash to Eastern Europe for a fee, although Western Union 
noted that this system provides no security for the sender. 
Guardia di Financia (financial police) and magistrate 
contacts explained that the current preferred method to 
transfer funds is via trusted individuals and personal 
contacts serving as couriers.  If extremists are attempting 
to use official channels, it is usually to send small amounts 
for personal reasons, mainly to family members back home, our 
interlocutors said. 
 
Banks Feeling the Burden 
------------------------ 
 
4. (C) Emmanuele Difenza, Director of Banca Intesa's 
Anti-Money Laundering Office was optimistic that almost all 
major European banks are "on the same wavelength" regarding 
terrorism finance controls.  He also reported that Banca 
Intesa bases its controls on the U.S. laws and regulations to 
ensure that its branch in New York is in compliance.  While 
he thought that controls are working well, Difenza expressed 
frustration at not having a central coordination body to 
manage all anti-terrorism finance lists.  He noted in 
addition to the EU list, his office monitors the OFAC list, 
UN lists and local lists from Italian authorities with names 
of individuals currently under investigation for connections 
to someone on any other existing list.  Although the names on 
this last list are not public to safeguard investigations, he 
gave Ahmed Nasreddin's personal secretary as an example of 
the type of individual on the list. 
 
5. (C) Difenza complained that banks are increasingly asked 
to be responsible for things unrelated to banking -- such as 
verifying customers, identity and detecting false documents. 
 Banks are "more than happy" to cooperate, but such tasks he 
feels ought to be law enforcement responsibility.  He gave 
the hypothetical of a young bank teller facing an individual 
whose name is on a list.  Does the teller ask the individual 
to return later?  Or, send the customer away, perhaps 
revealing to the individual that he/she may be under 
SUBJECT: FIELD-LEVEL IMPLEMENTATION OF ITALY,S 
investigation?  Such situations require specialized training, 
best left to the police, Difenza argued. 
Notifications -- Quality Not Quantity 
------------------------------------- 
 
6. (C) As reported reftel B, Western Union enjoys almost 70 
percent of the official money transfer market in Italy. 
General Counsel Paulo Zadra predicted that the number of 
"suspect transactions" notified to the Ufficio Italiano Cambi 
(UIC) in Rome this year would likely be the same, or slightly 
higher, than last year.  In 2004, Western Union notified 120 
suspect transactions, including 13 names from the UIC's 
terrorism blacklist, 31 for frequent transactions and 17 for 
false documents.  He noted that in the past it took months, 
or longer, for the UIC to follow-up with Western Union on 
suspicious transaction reports; now the contact is almost 
immediate.  Other Consulate contacts predicted that the 
number of notifications to Rome would remain constant, but 
that their "quality" would improve, as financial institutions 
gain more experience with the notification process. 
 
Comment 
------- 
 
7. (C) The quick follow-up time by the UIC to entities 
reporting suspect transactions is a positive development. 
The IMF found in its recent detailed assessment Italy,s 
anti-money laundering and TF regime that the UIC did 
insufficient filtering of the suspect transaction reports 
that it receives.  The IMF contended that this filtering 
deficit did not allow for immediate feedback to reporting 
entities. End Comment. 
 
Can't Track the Funds at the Destination 
---------------------------------------- 
 
8. (C) Milan magistrate Orsi confided to Econoff that one of 
his greatest challenges is tracing funds to their 
destination.  Unlike the official banking system that leaves 
formal traces and is under official oversight, investigation 
of possible funds coming through informal channels requires 
more  coordination and cooperation with local authorities in 
the countries to which the funds are sent.  Orsi lamented 
that investigations in one of his current cases show that 
extremist funds are being funneled into Algeria, but lack of 
cooperation by Algerian authorities has caused his 
investigation to come to a standstill. 
 
Rome Comment: Is Orsi Nudging USG? 
---------------------------------- 
 
9. (S) Orsi,s lament about lack of cooperation may have also 
been a gentle nudge for U.S. assistance in his investigation 
of Ahmed Nasreddin, listed on the UN 1267 Committee list. 
Senior Finance Ministry officials told U/S Levey that Orsi,s 
investigation had not yet turned up clear ties within Italy 
between Nasreddin and TF.  Orsi has channeled his informal 
request for additional information usable to build a legal 
case to the Financial Security Committee or FSC (Italy,s PCC 
equivalent).  The head of the FSC passed on Orsi,s request 
to Treasury U/S Levey.  End Rome Comment. 
 
Encouraging Immigrants to Use Official Channels 
--------------------------------------------- -- 
 
10. (C) Director of International Affairs for San Paolo Bank 
in Turin, Giuseppe Cuccurese, briefed Econoff on a new San 
Paolo Bank pilot project to create "multi-ethnic points" in 
select branches in cities with large immigrant populations. 
The first such point was opened in Turin, and a second is 
planned for Naples.  Multi-cultural points will offer 
information and forms in several languages (including 
Arabic).  The eventual goal is to have bank employees who 
speak prospective customers, languages.  While Cuccurese 
admitted attracting new customers was the key motivation, a 
second objective, which Cuccurese says has MFA and Italian 
Banking Association support, is encouraging immigrant,s to 
use the official banking system, rather than unregulated 
parallel systems. 
GRAZE